EURO 2024 Copenhagen
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1036. On the potential of arbitrage trading on the German intraday power market

Invited abstract in session MA-9: Modelling and Economics of Storage Technologies in Energy Markets, stream Energy Markets.

Monday, 8:30-10:00
Room: 10 (building: 116)

Authors (first author is the speaker)

1. Neele Leithäuser
Optimization, Fraunhofer ITWM
2. Till Heller
Optimization, Fraunhofer Institute for Industrial Mathematics ITWM
3. Elisabeth Finhold
Optimization, Fraunhofer Institute for Industrial Mathematics ITWM

Abstract

Our study focused on the potential of a simple and common risk-averse strategy called greedy pair trading on the German intraday power market. This strategy aims to monetize the flexibility potential of a battery or similar assets. We analyzed real-world order book data from 15 selected days between 2020 and 2022 to estimate the theoretical potential of this strategy when optimal pairs are selected. We also investigated the impact of unbalanced auction wins, which can be a challenge for practical implementation. In our analysis, we compared the greedy approach to the ex post optimal strategy and examined the effect of different frequencies of order book accesses. We found that increasing the frequency of optimization points in the greedy approach did not significantly improve the profit. However, in the ex post optimal strategy, halving the time between trading points resulted in an average profit increase of 30%. Additionally, we observed that a loss of up to 10% of the bids had a negligible impact on the overall profit. Our findings contribute to a better understanding of arbitrage trading on the German intraday market and highlight the advantages of incorporating predictive information and frequent optimization updates.

Keywords

Status: accepted

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